`
`CASE NO. 1:13-CV-00082
`
`OPINION & ORDER
`[Resolving Docs. 21, 27, 29, 30]
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF OHIO
`-------------------------------------------------------
`:
`:
`:
`
`DAVID MOWDER,
`
`Plaintiff,
`
`::
`
`:
`:
`PERMANENT GENERAL ASSURANCE. :
`CORPORATION OF OHIO, et al.,
`
` v.
`
`Defendant.
`
`::
`
`::
`
`-------------------------------------------------------
`
`JAMES S. GWIN, UNITED STATES DISTRICT JUDGE:
`
`This case is a copyright action that has been complicated by a bankruptcy. Plaintiff David
`
`Mowder says that he owns the copyright to a cartoon character—“the General”1/—and that
`
`Defendants2/ have used the character in their advertisements without his authorization or
`
`permission.3/ After Defendants filed a motion to dismiss the case, Mowder reopened a previously
`
`closed bankruptcy petition, which triggered an automatic stay of this case.4/ Mowder’s bankruptcy
`
`trustee, Ron Satija, has intervened as a real party in interest.5/ Before the Court now are Defendants’
`
`motions to dismiss, for judgment on the pleadings, and to disqualify the Trustee’s counsel as well
`
`1/See, e.g., Karate Commercial # video # The General Auto Insurance, www.thegeneral.com/commercials/karate-
`blackbelt/ (last visited Oct. 18, 2013)
`2/The complete list of Defendants is Permanent General Companies, Inc., Permanent General Assurance
`Corporation of Ohio, Permanent General Assurance Corporation, PGA Service Corporation, PGC Holdings Corp.,
`General Automobile Insurance Company, Inc., General Automobile Insurance Services of Ohio, Inc., General
`Automobile Insurance Services, Inc., General Automobile Insurance Services of Texas, Inc., General Automobile
`Insurance Services of Louisiana, Inc., and General Automobile Insurance Services of Georgia, Inc. The Court will refer
`to them collectively as Defendants or Permanent General.
`3/Doc. 1.
`4/Docs. 24, 25.
`5/Doc. 28.
`
`
`
`Case: 1:13-cv-00082-JG Doc #: 46 Filed: 10/31/13 2 of 12. PageID #: 592
`
`Case No. 1:13-CV-00082
`Gwin, J.
`
`as the Trustee’s motion to deny Defendants’ motion to dismiss.6/ For the reasons that follow, the
`
`Court DENIES Defendants’ motions to dismiss, for judgment on the pleadings, and to disqualify
`
`the Trustee’s counsel and DENIES AS MOOT the Trustee’s motion to deny the motion to dismiss.
`
`I. Factual and Procedural Background
`
`Plaintiff David Mowder says that in 1998 and while living in Northeast Ohio, he created the
`
`cartoon character “the General” while acting as an independent contractor for Defendants Permanent
`
`General.7/ He says he created the character for the limited purpose of helping Permanent General
`
`promote their 1998 summer picnic.8/ However, he says that after 1998 and without his permission
`
`or authorization, Permanent General began to use the character in their advertisements.9/ Defendant
`
`Permanent General generally says Mowder did not create the character and that Mowder assigned
`
`any right he had in the design to the advertising agency that hired Mowder.10/
`
`On July 31, 2012, after moving to the Western District of Texas, Plaintiff and his wife filed
`
`for bankruptcy under Chapter 7 of the Bankruptcy Code.11/ The bankruptcy court appointed Ron
`
`Satija the trustee of their estate.12/ In their bankruptcy petition, Plaintiff did not say that he owned
`
`any copyrights or other intellectual property.13/ On November 2, 2012, the case was closed.14/
`
`On October 31, 2012—while Plaintiff’s bankruptcy petition was still pending—Plaintiff
`
`6/Docs. 21, 27, 29, 30.
`7/Doc. 1 at ¶¶ 5, 25.
`8/Id. at ¶ 30.
`9/Id. at ¶¶ 29, 31-35.
`10/Doc. 22 at ¶¶ 21-28 (Counterclaim).
`11/Doc. 24 at 1.
`12/Id.
`13/Doc. 21-2 at 19.
`14/Doc. 24 at 1.
`
`-2-
`
`
`
`Case: 1:13-cv-00082-JG Doc #: 46 Filed: 10/31/13 3 of 12. PageID #: 593
`
`Case No. 1:13-CV-00082
`Gwin, J.
`
`submitted a copyright registration application for “the General” through counsel.15/ On November
`
`5, 2012, the Copyright Office approved the registration of the copyright.16/
`
`On January 11, 2013, less than six months after Mowder failed to schedule the copyright to
`
`the bankruptcy court, Plaintiff filed this lawsuit against Permanent General.17/ He seeks actual
`
`damages and disgorgement of profits, an injunction against Defendants’ future use of the character,
`
`and destruction of all infringing material bearing the character.18/ The same counsel who submitted
`
`Plaintiff’s copyright registration represented Plaintiff in this case.19/
`
`On February 11, 2013, Defendants moved to dismiss the complaint under Federal Rule of
`
`Civil Procedure 12(b)(6).20/ With that motion, Defendants say that Plaintiff should be judicially
`
`estopped from pursuing this claim because he did not list the copyright or this lawsuit in his and his
`
`wife’s bankruptcy petition.21/ Permanent General also filed an answer and counterclaim; they seek
`
`a declaratory judgment that Mowder does not own the copyright to the character.22/
`
`On March 1, 2013, Plaintiff notified the Court that he and his wife had moved on February
`
`22, 2013, to reopen their bankruptcy petition.23/ On February 27, 2013, the bankruptcy court
`
`reopened the petition and reappointed Satija as trustee of the estate.24/
`
`On August 20, 2013, Trustee Satija moved to reopen the case and to substitute himself as the
`
`15/Doc. 1-2.
`16/Id.
`17/Doc. 1.
`18/Id. at 12.
`19/Id. at 13.
`20/Doc. 21. Neither Plaintiff Mowder nor Trustee Satija have filed an opposition to this motion. However,
`Trustee Satija’s subsequent motion to deny the motion to dismiss presents his arguments in opposition to the motion.
`21/Doc. 21-1.
`22/Doc. 22.
`23/Doc. 24.
`24/Id.
`
`-3-
`
`
`
`Case: 1:13-cv-00082-JG Doc #: 46 Filed: 10/31/13 4 of 12. PageID #: 594
`
`Case No. 1:13-CV-00082
`Gwin, J.
`
`real party in interest.25/ Satija also moved for the Court to deny Permanent General’s previously filed
`
`motion to dismiss because he says that he should not be judicially estopped by Mowder’s
`
`representations to the bankruptcy court when the bankruptcy trustee brings or prosecutes the suit.26/
`
`With the bankruptcy court’s approval, Trustee Satija retained Plaintiff Mowder’s counsel as the
`
`estate’s counsel to prosecute this case.27/ Permanent General objected to counsel’s retention on the
`
`grounds that there would be a conflict of interest, but the bankruptcy court overruled their
`
`objection.28/ On September 3, 2013, this Court granted the Trustee’s motion to reopen this case and
`
`to substitute the Trustee as the real party in interest and ordered the Trustee to answer Permanent
`
`General’s counterclaim.29/
`
`On September 6, 2013, Permanent General filed two motions. They first moved to disqualify
`
`the Trustee’s counsel; Defendants say a conflict of interest exists because of counsel’s
`
`representation of Plaintiff Mowder.30/ They also moved for judgment on the pleadings because they
`
`say that the Trustee does not possess a valid copyright registration, a prerequisite to bringing a
`
`copyright infringement claim.31/
`
`These four motions are now ripe for decision.
`
`25/Doc. 26.
`26/Doc. 27. On September 6, 2013, Permanent General filed a memorandum in opposition. Doc. 31. On
`September 16, 2013, Trustee Satija filed a reply in support of his motion. Doc. 32.
`27/Doc. 30-2 at 7, 36-37.
`28/Id. at 13-20, 30-37.
`29/Doc. 28. On September 23, 2013, Trustee Satija filed an answer to the counterclaim. Doc. 33.
`30/Doc. 29. On September 23, 2013, Trustee Satija filed a memorandum in opposition. Doc. 34. On October
`3, 2013, Permanent General filed a reply in support of their motion. Doc. 37.
`31/Doc. 30. On October 9, 2013, Trustee Satija filed a memorandum in opposition. Doc. 38. On October 28,
`2013, Permanent General filed a reply in support of their motion. Doc. 43.
`-4-
`
`
`
`Case: 1:13-cv-00082-JG Doc #: 46 Filed: 10/31/13 5 of 12. PageID #: 595
`
`Case No. 1:13-CV-00082
`Gwin, J.
`
`A.
`
`Legal Standard
`
`II. Defendants’ Motion to Dismiss
`
`Defendants moved to dismiss this case on the ground of judicial estoppel. “Judicial estoppel
`
`is an equitable doctrine that preserves the integrity of the courts by preventing a party from abusing
`
`the judicial process through cynical gamesmanship, achieving success on one position, then arguing
`
`the opposite to suit an exigency of the moment.”32/ “The doctrine of judicial estoppel bars a party
`
`from (1) asserting a position that is contrary to one that the party has asserted under oath in a prior
`
`proceeding, where (2) the prior court adopted the contrary position ‘either as a preliminary matter
`
`or as part of a final disposition.’”33/ “[T]he doctrine of judicial estoppel ‘is applied with caution to
`
`avoid impinging on the truth-seeking function of the court because the doctrine precludes a
`
`contradictory position without examining the truth of either statement.’”34/
`
`B.
`
`Analysis
`
`Defendants say that Plaintiff Mowder did not claim ownership of the copyright or the right
`
`to bring this lawsuit in his bankruptcy petition.35/ Defendants say that because he took a contrary
`
`position in his bankruptcy petition to the one he takes now, he should be estopped from prosecuting
`
`this lawsuit.36/
`
`Now that Plaintiff Mowder is no longer the real party in interest and the Mowder estate
`
`would recover on any judgment, Defendants’ argument fails. The Sixth Circuit has held that a
`
`32/Teledyne Indus., Inc. v. NLRB, 911 F.2d 1214, 1217-18 (6th Cir. 1990).
`33/Browning v. Levy, 283 F.3d 761, 775 (6th Cir. 2002) (quoting Teledyne, 911 F.3d at 1218).
`34/Lorillard Tobacco Co. v. Chester, Willcox & Saxbe, 546 F.3d 752, 757 (6th Cir. 2008) (quoting Teledyne,
`911 F.3d at 1218).
`35/Doc. 21-1 at 2-3.
`36/Id. at 5-7.
`
`-5-
`
`
`
`Case: 1:13-cv-00082-JG Doc #: 46 Filed: 10/31/13 6 of 12. PageID #: 596
`
`Case No. 1:13-CV-00082
`Gwin, J.
`
`bankrupt plaintiff’s “failure to disclose his claims [in his bankruptcy petition] does not bar the trustee
`
`from pursuing them.”37/ The fact that Plaintiff Mowder might receive a portion of any award Trustee
`
`Satija could win initial petition does not mean that this case should be dismissed. Accordingly, the
`
`Court DENIES Permanent General’s motion to dismiss. The Court also DENIES Trustee Satija’s
`
`motion to deny the motion to dismiss because it is moot.
`
`III. Defendants’ Motion for Judgment on the Pleadings
`
`A.
`
`Legal Standard
`
`“After the pleadings are closed—but early enough not to delay trial—a party may move for
`
`judgment on the pleadings.”38/ On a motion for judgment on the pleadings under Federal Rule of
`
`Civil Procedure 12(c), the Court uses the same standard as a motion to dismiss for failure to state
`
`a claim upon which relief can be granted under Rule 12(b)(6).39/
`
`“To survive a motion to dismiss [under Rule 12(b)(6)], a complaint must contain sufficient
`
`factual matter, accepted as true, to ‘state a claim for relief that is plausible on its face.’”40/ The
`
`plausibility requirement is not a “probability requirement,” but requires “more than a sheer
`
`possibility that the defendant has acted unlawfully.”41/
`
`Federal Rule of Civil Procedure 8 provides the general standard of pleading and only requires
`
`that a complaint “contain . . . a short plain statement of the claim showing that the pleader is entitled
`
`37/Stephenson v. Malloy, 700 F.3d 265, 272 (6th Cir. 2012); see also Reed v. City of Arlington, 650 F.3d 571,
`572 (5th Cir. 2011) (en banc) (“The question before the en banc court is whether judicial estoppel bars a blameless
`bankruptcy trustee from pursuing a judgment that the debtor—having concealed the judgment during bankruptcy—is
`himself estopped from pursing. We hold that it does not.”)
`38/Fed. R. Civ. P. 12(c).
`39/See Tucker v. Middleburg-Legacy Place, 539 F.3d 545, 549 (6th Cir. 2008).
`40/Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 570 (2007)).
`41/Id.
`
`-6-
`
`
`
`Case: 1:13-cv-00082-JG Doc #: 46 Filed: 10/31/13 7 of 12. PageID #: 597
`
`Case No. 1:13-CV-00082
`Gwin, J.
`
`to relief.”42/ “Rule 8 marks a notable and generous departure from the hyper-technical, code-pleading
`
`regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing
`
`more than conclusions.”43/ In deciding a motion to dismiss under Rule 12(b)(6), “a court should
`
`assume the[ ] veracity” of “well-pleaded factual allegations,” but need not accept a plaintiff's
`
`conclusory allegations as true.44/
`
`B.
`
`Analysis
`
`Permanent General says that neither the Trustee nor Plaintiff holds a valid copyright
`
`registration because Plaintiff stated on his application to the Copyright Office that he owned the
`
`copyright, when his bankruptcy estate owned the copyright.45/ That misstatement, according to
`
`Defendants, is a “material misstatement that invalidates the registration.”46/ Arguing that possession
`
`of a valid copyright registration is a prerequisite to bringing an infringement claim, Defendants say
`
`the case must be dismissed.47/
`
`In support of this argument, Defendants cite Kunkel v. Jasin from the Third Circuit.48/ In
`
`Kunkel, the plaintiff filed copyright registrations during a bankruptcy that listed himself as the
`
`owner, not his bankruptcy estate.49/ The Third Circuit held that each of the registrations was invalid
`
`“[b]ecause the bankruptcy estate, not Kunkel, owned the designs at the time that Kunkel registered
`
`42/Fed. R. Civ. P. 8(a)(2).
`43/Iqbal, 556 U.S. at 678–79 (citations omitted).
`44/Id.
`45/Doc. 30-1 at 6.
`46/Id. at 7.
`47/Id. at 8.
`48/420 F. App’x 198 (3d Cir. 2011) (per curiam).
`49/Id. at 200.
`
`-7-
`
`
`
`Case: 1:13-cv-00082-JG Doc #: 46 Filed: 10/31/13 8 of 12. PageID #: 598
`
`Case No. 1:13-CV-00082
`Gwin, J.
`
`them with the Copyright Office.”50/ Without a valid registration, the Third Circuit affirmed the grant
`
`of summary judgment to the defendant for the plaintiff’s infringement claims.51/
`
`Title 17 United States Code section 411(b) states that a copyright registration is valid
`
`“regardless of whether the certificate contains any inaccurate information” unless the applicant knew
`
`that the information was inaccurate and “the inaccuracy of the information, if known, would have
`
`caused the Register of Copyrights to refuse the registration.”52/
`
`First, reading the pleadings most favorably to the Trustee, there is no indication that Mowder
`
`knew that he technically did not own the copyright when he filed his application. Permanent General
`
`does not even suggest in their motion that Plaintiff Mowder knew he did not own the copyright when
`
`he filed his application. Kunkel v. Jasin is, therefore, distinguishable: in that case, the defendant
`
`moved for summary judgment, not a judgment on the pleadings when all inferences are based solely
`
`on the pleadings.53/ Accordingly, under 17 U.S.C. § 411(b), the mistake on the copyright registration
`
`does not invalidate the registration.
`
`Moreover, even if the pleadings did show that Mowder knew he did not own the copyright,
`
`Permanent General makes no showing that this technical misstatement was material. It is unclear
`
`why the Copyright Office would care whether Mowder owned the copyright or his bankruptcy estate
`
`owned the copyright. Although the Third Circuit has held differently, that decision is not binding
`
`on this Court, nor is it persuasive on this issue. The Kunkel Court did not explain why the Copyright
`
`Office would deny a registration if the Copyright Office knew that the estate, not the individual,
`
`50/Id.
`51/Id. at 200-01.
`52/17 U.S.C. § 411(b).
`53/See 420 F. App’x at 199.
`
`-8-
`
`
`
`Case: 1:13-cv-00082-JG Doc #: 46 Filed: 10/31/13 9 of 12. PageID #: 599
`
`Case No. 1:13-CV-00082
`Gwin, J.
`
`owned the copyright; the court merely asserted that the error was material.54/ The only support for
`
`this assertion was another Third Circuit decision which held that a misstatement of the type of work
`
`to be copyrighted—such as a song or video—was a material misstatement.55/ This does not show
`
`that the error in this case—naming the individual as the owner instead of his bankruptcy estate—was
`
`material. Therefore, Permanent General has not shown that even if there were a knowing
`
`misstatement, that misstatement was material.
`
`There is no basis at this time to find that the copyright registration is invalid. The Court,
`
`therefore, DENIES the motion for judgment on the pleadings.
`
`IV. Defendants’ Motion to Disqualify Trustee’s Counsel
`
`A.
`
`Legal Standard
`
`A conflict of interest between current clients exists if the representation of one client will be
`
`directly adverse to another client or if there is a substantial risk that the lawyer’s counsel to one client
`
`will be materially limited by responsibilities to another client.56/ If a conflict exists, a lawyer must
`
`not represent either client unless (1) the lawyer will be able to give competent and diligent
`
`representation to each client, (2) both clients give informed consent confirmed in writing, (3) the
`
`representation is not prohibited by law, and (4) the representation does not involve the assertion of
`
`54/See id. at 200.
`55/Id. (citing Raquel v. Educ. Mgmt. Corp., 196, F.3d 171, 177 (3d Cir. 1999), cert. granted and judgment
`vacated on other grounds, 531 U.S. 952 (2000), (holding that when a registration “identifies the work as an audiovisual
`work” rather than “a song,” the misstatement is material)). The court stated earlier in its opinion that only the owner of
`a copyright may register the copyright. Id. at 199 (citing 17 U.S.C. § 408(a)). However, this requirement seems to fall
`under § 411(b), which saves inaccurate registrations as long as the error was not knowing and material. 17 U.S.C. §
`411(b). The fact that another person owns a copyright in many circumstances is clearly material, but when the actual
`owner of a copyright is the registrant’s bankruptcy estate, it is far from clear that the error is material.
`56/Ohio Rules of Prof’l Conduct R. 1.7(a).
`
`-9-
`
`
`
`Case: 1:13-cv-00082-JG Doc #: 46 Filed: 10/31/13 10 of 12. PageID #: 600
`
`Case No. 1:13-CV-00082
`Gwin, J.
`
`a claim by one client against another in the same proceeding.57/
`
`B.
`
`Analysis
`
`To show that the Trustee’s counsel should be disqualified because of counsel’s representation
`
`of Plaintiff Mowder, Permanent General must show some sort of adverse interest between the
`
`Trustee and Plaintiff or a substantial risk of materially limited representation to one or the other.
`
`Permanent General identifies four possible sources of such a conflict: the judicial estoppel
`
`question, the copyright registration question, a claim for attorney’s fees, and the “inherent adversity
`
`of interest” between Mowder and Trustee Satija.58/
`
`This Court has already found that Permanent General’s arguments regarding judicial estoppel
`
`and the copyright registration lose. This Court does not need to decide the judicial estoppel question
`
`because Trustee Satija is now the real party in interest. And Permanent General has provided no
`
`evidence to show that Mowder made a knowing and material misstatement on his copyright
`
`application. Therefore, these two issues do not produce a conflict requiring disqualification of
`
`counsel.
`
`Defendants’ claim for attorney’s fees also does not create a conflict of interest between
`
`Mowder and Trustee Satija because the Trustee is prosecuting this lawsuit and any claim for
`
`attorney’s fees will be against the estate.
`
`Finally, the other possible conflicts between Plaintiff and the Trustee are issues for the
`
`bankruptcy court, not concerns for this Court. Trustee Satija and Plaintiff Mowder have different
`
`57/Id. at R. 1.7(b)-(c). The parties dispute whether Plaintiff Mowder is a current client of counsel or a former
`client of counsel. The legal standard for current conflicts is more stringent than the standard for former clients. Compare
`id. at R. 1.7, with id. at R. 1.9. Because the Court finds that there is no conflict of interest under the more stringent
`current client standard, the Court need not address whether Plaintiff is a current or former client at this time.
`58/Doc. 29-1 at 8-15.
`
`-10-
`
`
`
`Case: 1:13-cv-00082-JG Doc #: 46 Filed: 10/31/13 11 of 12. PageID #: 601
`
`Case No. 1:13-CV-00082
`Gwin, J.
`
`interests. Because unsecured creditors must be made whole before Mowder receives anything,
`
`Mowder will oppose any settlement even where the settlement would fully satisfy unsecured creditor
`
`claims. And because creditors do not share in any recovery beyond their claims, creditors bear all
`
`the risk, and none of the potential reward, in continuing litigation after a settlement is offered.
`
`Mowder’s attorney seems to have obvious divided loyalties.
`
`Despite this apparent conflict, the bankruptcy court approved the Trustee using Mowder’s
`
`counsel. The bankruptcy court has already decided to allow counsel’s representation despite
`
`Permanent General’s objection.59/ While this Court questions this appointment, the bankruptcy court
`
`controls this call.
`
`For these reasons, the purported conflicts that Permanent General identifies are insufficient
`
`for the Court to disqualify the Trustee’s counsel. Therefore, the Court DENIES the motion to
`
`disqualify counsel.
`
`V. Conclusion
`
`For the foregoing reasons, the Court DENIES Defendants’ motions to dismiss, for judgment
`
`59/Doc. 30-2 at 30-37. The bankruptcy court also stated that because Trustee Satija had only been able to retain
`present counsel to take the case after a diligent search, “basically, I’m faced with the situation that if I don’t allow
`[counsel] to represent the trustee, then the one that could really reap a windfall would be Permanent General, at the
`expense of creditors of the estate.” Id. at 34.
`
`-11-
`
`
`
`Case: 1:13-cv-00082-JG Doc #: 46 Filed: 10/31/13 12 of 12. PageID #: 602
`
`Case No. 1:13-CV-00082
`Gwin, J.
`
`on the pleadings, and to disqualify the Trustee’s counsel and DENIES AS MOOT the Trustee’s
`
`motion to deny the motion to dismiss.
`
`IT IS SO ORDERED
`
`Dated: October 31, 2013
`
`s/ James S. Gwin
`JAMES S. GWIN
`UNITED STATES DISTRICT JUDGE
`
`-12-